EU Green Fuel Debate Back on Agenda: Hedegaard

6 April 2011

European governments may soon resume discussions on a proposal to promote cleaner energy by blacklisting fuels whose production is especially polluting, says EU Climate Change Commissioner Connie Hedegaard.

According to the EU climate chief, default emission values for fuel derived from tar sands and oil shale will be peer reviewed and included in the proposal. The Commission intends to present a draft implementation measure for such values, which aim to meet the EU's fuel quality directive requiring oil companies in the EU market to reduce the greenhouse gas emissions of their fuels by 6 percent compared to 2010 levels in the next decade.

The issue has emerged as an irritant in trade relations between the EU and Canada, a major producer of oil trapped in sediment, which requires extra energy to extract.  Canada has expressed opposition to the notion of ascribing tar sands production a greenhouse gas value of 107 grams per megajoule of fuel compared to an average of 87.1 grams for crude oil. It has gone so far as to suggest that doing so could constitute "unjustifiable discrimination" under WTO law, potentially disadvantaging Canadian oil products in the European market.

Canadian officials have denied rumours that they had threatened to scrap ongoing negotiations on a comprehensive free trade agreement with the EU if Brussels did not back down on the fuel regulations. Nevertheless, the Canadian press reported this week on a letter, dated 18 March, sent by the Canadian government to the EU commissioners for climate, energy, and trade, warning that the EU's ranking of fuels based on carbon intensity  "raises the prospect of unjustified discrimination and is not supported by the science."

Canada believes that the EU is singling out Canadian tar sands production and ignoring other carbon-intensive fuels such as heavy oil from the Middle East and Nigeria. "Singling out oil sands crude creates an artificial and potentially discriminatory regulatory distinction," said a note that accompanied the letter, reports Reuters.  Canada does not export any tar sands oil to the EU. However, the oil industry is politically influential in Canada, and the 27-member bloc could be a potential market in the future.

European environmentalists have their own concerns about the prospective Canada-EU agreement: they fear that if the deal's provisions fail to establish the EU's right to take effective measures against climate change, the EU could potentially face legal challenges on the categorisation of fuels.

Having pushed back the decision once in the face of public scrutiny, the EU now expects to announce its fuel standard policies in December. More robust scientific evidence in conjunction with the now proposed inclusion of similar default values for shale oil -- whose use EU member state Estonia has been promoting -- may prevent Canada from alleging discrimination.

ICTSD Reporting; "Oilsands to be black-listed by the EU?", REUTERS, 25 March 2011; "EU Climate Chief sees green fuel debate in months," REUTERS, 28 March 2011; "Canada-EU trade deal threatened by oilsands dispute," VANCOUVER SUN, 21 February 2011; "Row over green status of oil from tar sands," EUROPEAN VOICE,  3 February 2011; "Canada warns EU of trade conflict over oilsands," NATIONAL POST, 4 April 2011.

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